406 A Scientific Approach to Packaging Optimization...Jack Ampuja, Supply Chain Optimizers Why Packaging is an Issue Most organizations do not view packaging as part of the supply

Jack Ampuja, Supply Chain Optimizers

Packaging Optimization

406

A Scientific Approach

to Packaging

Optimization

Jack Ampuja

Supply Chain Optimizers

1


Corrugate Background

Corrugate is infinitely recyclable

Cellulose fibers shorten during recycling process making paper softer and less strong

Good for facial tissue…not good for packaging

N. American standard is 35% recycled content

Provides best combo of performance and cost

China uses 100% recycled content

Lack virgin softwood pulp

Use double, triple wall boxes to increase strength

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Why Packaging is an Issue

Most organizations do not view packaging as part of

the supply chain

Cost reduction & sustainability impact is grossly under-

estimated because impact of on logistics is not understood

Many departments are involved in decisions

Marketing, Purchasing, Logistics, Manufacturing, QC,

Engineering….. all focus on different goals

All supply chain members share results – good or bad

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Packaging Approaches

Typical

Use box already in-house

Rely on marketing

Use internal engineering

Rely on contract manufacturer

Use customer specification

Rely on packaging supplier

Avoid complexity: limit # of boxes

Scientific

Use packaging software

Rely on packaging science

Understand freight analytics

Use advanced mathematics

Employ lots of boxes

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Optimization Opportunities Abound

Traditional manufactured product

Multiple units of the same product in a box

Imported product – especially from Asia

Little application of packaging science

Pick-pack operations in e-commerce

Many ship 1 million+ combinations of weight & cube

each year

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Pallet DifferencesOriginal

Count: 50 cases

Overhang: 1.3”

Stacking strength

1.1 pallets high

Truck loading

100/floor spot with machine

loading..110 with hand

stacking

Optimized

60 cases

.7” & .5”

2.1 pallets high

120/floor spot with

machine loading

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Optimization Results

16% reduction in freight & warehouse cost

Better stacking strength: less damage

Less overhang on pallet

No hand stacking needed on full truck loads

Can be positioned as a customer benefit as their

logistics costs will decline too

Major ‘green’ improvement

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R G Barry

$125 M footwear supplier with no profit

In danger of missing loan repayment

Sourcing from Mexico & China

Used packaging optimization to increase ocean

container payload

Reduced costs $2.8 M

Gained business increase of $10 M from Walmart

and $5 M from Target

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Process

Very modest adjustments to shipping cases

Eliminated excess void

Moved away from shallow boxes

Balanced complexity versus efficiency

Reconfigured retail packs

Changed pallets to column stacking

Suggested standard pack revisions

Increased Walmart box from 12 to 18 pairs per master box

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OPERATIONAL

RESULTS Item Cost/Benefit

- Reduced corrugate spend 15%

(COGS savings)

$ 200,000

-Reduced inbound freight spend 20%

(600 fewer containers /COGS savings)

$ 1,580,000

-Reduced warehouse storage requirements 25%

(storage & handling / SG&A savings)

$ 1,000,000

-Reduced miscellaneous expenses

(damage, pallets, shrink, labels, etc.)

$ 100,000

+ SCO fees ($ )

+ Miscellaneous Internal project costs

(temp labor, travel & IT)

($ 50,000 )

Total Savings $ 2,800,000

The “knowledge” transfer of is difficult to quantify....

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11% Gain in Payload

Present Future

912 Cartons/load 1009 Cartons/load

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Marketed Solution

to Key Customers

Presented to Wal-Mart

15% reduction in corrugate

20% reduction in freight

25% reduction in distribution cost

Presented to Target

15% reduction in corrugate

20% reduction in freight

25% reduction in distribution cost

Recaptured national distribution$10 million

Awarded men’s volume$5 million

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Key Learning

PointsExecutive sponsor is critical to accelerating success.

Recognize organization’s true core competencies.

Overcome “ We can do this internally” skeptics.

Strong & flexible supply chain partnerships facilitate savings.

“Speed to Value” is an attitude!

Data integrity is critical (quality of the item master file).

Post-implementation support is a must…..issues never end

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Impact of

eCommerce

Thousands of new shippers

No science applied to packaging

Many daily shipments of one box per destination

Lots of residential deliveries

Has changed cost profile of couriers which traditionally managed by weight

Typical eCommerce shipper achieves 60% cube utilization

This means they ship 40% filler & air

Many boxes are much worse

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Consideration

Typical box supplier or packaging engineer

cannot resolve package vs freight cost issues

Try to protect one item [lamp shade] in box or many

units of same product [light bulbs]

Can be accomplished with software

They do not understand freight details or costs

Commercial packaging software cannot do pick-

pack operations because of many different items

shipping together

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Major Hi-tech Company – shipping

hot air 3 cables weighing 1 lb

shipped via UPS Ground

Dim weight: 15 lbs

(16” x 14” x 11”)

Product: 54 cu in

Package: 2,464 cu in

Cube utilized: 3%

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Major

Retailer –

poor

packaging

4 chair mats shipped via FedEx

Ground

Each package dimensions are:

50”x14”x14” = 9,800 cu. in

Actual Wt. = 17 lbs. each

Billed Wt. = 60 lbs. each

All four chair mats could have

been shipped in one box of

50”x14”x14”

Actual Wt. = 68 lbs. for all four

chair mats…billed for 240 lbs

Cube utilization: 25%

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National Ecommerce Retailer

Specialty retailer: 145 stores + on-line sales Increased boxes from 16 to 22

only 9 are original sizes….13 new boxes

Full Year Impact:

Reduction in carton material 22.4% Reduction in filler 60.3%

Reduction in packing labor 12.5%

Reduction in freight $ 19.8% Total cost reduction 23.2%

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Dim Weight Impacting LTL

Brad Jacobs CEO of XPO:

We don’t want inefficient freight – light density

product, susceptible to damage, doesn’t fit pallet,

tough to handle - but if you tender to XPO we will

charge accordingly

We will install pallet dimensioners into all cross-dock

operations to verify shipment density

All major LTL carriers use pallet dimensioners

Cost: $65,000…paid back within 90 days

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Impact of Packaging & Loading

Product cube = 5.42 cu ft

Density of 44.83 lbs / cu ft freight class: 55

Pallet cube = 11.62 cu ft

Density of 20.93 lbs / cu ft freight class: 70

Freight cost of class 70 = 30% higher than 55

….inefficient pallet loading has increased freight cost 30%

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Box Efficiency

Most economical box has ratio of

L2 - W1 - D2

Example: 10” x 5” x 10” = 500 cu in

25” x 5” x 4” = 500 cu in

Box#2 uses 20% more corrugated

There are more than 10 different ways to

construct a box….each impacts cost differently

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Engineer’s Dilemma

Easiest box to make is a square

Provides good strength to contents

But square box is not a good solution for logistics

Logistics world = rectangular

…..does he optimize engineering or logistics?

Reality: in a 12 count box of rectangular units

there are 324 possible combinations of case

pack arrangements & pallet patterns

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Packaging Lessons

Transport cost must be #1 consideration

Much higher than warehousing or packaging

Don’t leave box decision to supplier especially in Asia…just lack expertise

Always avoid square & cube boxes

They use more material than rectangles and are not good fit for logistics

Use column stacking in warehouse

Provides much better strength than interlock pallet pattern

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Packaging Lessons Cont…

E-commerce is not really a packaging issue

…more freight & math problem

Packaging decisions require logistics input

before box is created

Sustainability needs a corporate champion to

gain traction

Packaging optimization is all green

Improves sustainability & profitability

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Scientific Approach

Excellent opportunity for efficiency & green

improvement

Real $ & environmental benefit is in freight

Typical reduction opportunity from total cost of

boxes, filler, packing labor, outbound freight:

- 10% for manufacturers/inbound

- 15% for pick-pack companies

Process is over-looked by most firms

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Closing Thought

“The greatest obstacle to discovery is not ignorance….it is the illusion of knowledge.”

- Daniel J. Boorstin:

author, historian, Librarian of Congress

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Documents

406 A Scientific Approach to Packaging Optimization...Jack Ampuja, Supply Chain Optimizers Why Packaging is an Issue Most organizations do not view packaging as part of the supply